CONFORMED COPY

LOAN NUMBER 1355 - TUN

LOAN AGREEMENT

(Second Power Project)

between

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

and

SOCIETE TUNISIENNE DE L 'ELECTRICITEET DU GAZ

Dated January 12, 1977

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LOAN AGREEMENT

AGREEMENT, dated January 12, 1977, between INTERNATIONAL

BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called

the Bank) and SOCIETE TUNISIENNE DE L'ELECTRICITE ET DU GAZ (here-

inafter called the Borrower), an Etablissement Public d caractere

Industriel et Commercial, established and operating pursuant to

the Borrower's Decree-Law No. 62-8, dated April 3, 1962;

WHEREAS (A) the Borrower has requested the Bank to assist in

the financing of a portion of the foreign exchange cost of the

Project described in Schedule 2 to .this Agreement by making the

Loan as hereinafter provided;

(B) the Borrower has represented to the Bank that it intends

* to contract from Banque Nationale de Paris and Societe Tunisienne

de Banque, a loan (hereinafter called the Other Loan) in an aggre-

gate principal amount about forty-six million french francs

(FF46,ooo,ooo) to be guaranteed by Compagnie Fran2aise d'Assurance

pou l'Exportation as to principal, interest and other charges,

to assist in the financing of the Project on the terms and condi-

tions set forth in an agreement (hereinafter called the Other Loan

Agreement) to be entered into between the Borrower and Banque

Nationale de Paris and Societe Tunisienne de Banque;

WHEREAS the Bank has agreed, on the basis, inter alia, of

the foregoing, to make a loan to the Borrower upon the terms and

conditions hereinafter set forth;

NOW THEREFORE the parties hereto hereby agree as follows:

-2-

ARTICLE I

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept all the

provisions of the General Conditions Applicable to Loan and Guar-

antee Agreements of the Bank, dated March 15, 1974, with the same

force and effect as if they were fully set forth herein (said

General Conditions Applicable to Loan and Guarantee Agreements of

the Bank being hereinafter called the General Conditions).

Section 1.02. Wherever used in this Agreement, unless the

context otherwise requires, the several terms defined in the

General Conditions and in the Preamble to this Agreement have the

respective meanings therein set forth and the following additional

terms have the following meaning:

(a) "Prior Loan Agreements" means the loan agreement, Loan No.

724-TUN, (El Borma-Gabes Gas Pipeline Project) dated February 25,

1971, and the loan agreement, Loan No. 815-TUN (Power Project)

dated April 20, 1972, all between the Bank and the Borrower; and

(b) "Subsidiary" means any company of which a majority of

the outstanding voting stock or other proprietory interest is

owned or effectively controlled by the Borrower or by any one or

more subsidiaries of the Borrower or by the Borrower and one or

more of its subsidiaries.

0.......

-3-

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower, on

the terms and conditions in the Loan Agreement set forth or re-

ferred to, an amount in various currencies equivalent to fourteen

million five hundred thousand dollars ($14,500,000).

Section 2.02. The amount of the Loan may be withdrawn from

the Loan Account in accordance with the provisions of Schedule 1

to this Agreement, as such Schedule may be amended from time to

time by agreement between the Borrower and the Bank, for expendi-

tures made (or, if the Bank shall so agree, to be made) in respect

of the reasonable cost of goods and services required for the Proj-

ect and to be financed out of the proceeds of the Loan.

Section 2.03. Except as the Bank shall otherwise agree, con-

tracts for the purchase of goods or for civil works to be financed

out of the proceeds of the Loan, shall be procured in accordance

with the provisions of Schedule 4 to this Agreement.

Section 2.04. The Closing Date shall be June 30, 1981 or such

later date as the Bank shall establish. The Bank shall promptly

notify the Borrower and the Guarantor of such later date.

Section 2.05. The Borrower shall pay to the Bank a commitment

charge at the rate of three-fourths of one per cent (3/4 of 1%)

per annum on the principal amount of the Loan not withdrawn from

time to time.

- 4 - 12-28-76

Section 2.06. The Borrower shall pay interest at the rate of

eight and seventy hundredths per cent (8.70%) per annum on the

principal amount of the Loan withdrawn and outstanding from time

to time.

Section 7.07. Interest and other charges shall be payable

semi-annually on April 15 and October 15 in each year.

Section 2.08. The Borrower shall repay the principal amount

of the Loan in accordance with the amortization schedule set forth

in Schedule 3 to this Agreement.

* -5-

ARTICLE III

Execution of the Project

Section 3.01. The Borrower shall carry out the Project with

due diligence and efficiency and in conformity with appropriate

engineering, public utility, financial and administrative practices,

and shall provide, promptly as needed, the funds, facilities, ser-

vices and other resources required for the purpose.

Section 3.02. (a) The Borrower undertakes to insure, or make

adequate provision for the insurance of, the imported goods to be

financed out of the proceeds of the Loan against hazards incident

to the acquisition, transportation and delivery thereof to the

place of use or installation, and for such insurance any indemnity

shall be payable in a currency freely usable by the Borrower to re-

place or repair such goods.

(b) Except as the Bank shall otherwise agree, the Borrower

shall cause all goods and services financed out of the proceeds

of the Loan to be used exclusively for the Project.

Section 3.03. (a) The Borrower shall furnish to the Bank,

promptly upon their preparation, the plans, specifications, reports,

contract documents and construction and procurement schedules for

the Project, and any material modifications thereof or additions

thereto, in such detail as the Bank shall reasonably request.

-6-

(b) The Borrower: (i) shall maintain records adequate to

record the progress of the Project (including the cost thereof)

and to identify the goods and services financed out of the pro-

ceeds of the Loan, and to disclose the use thereof in the Project;

(ii) shall enable the Bank's accredited representatives to visit

the facilities and construction sites included in the Project and

to examine the goods financed out of the proceeds of the Loan and

any relevant records and documents; and (iii) shall furnish to

the Bank all such information as the Bank shall reasonably request

concerning the Project, the expenditure of the proceeds of the

Loan and the goods and services financed out of such proceeds.

(c) The Borrower shall enable the Bank's representatives

to examine all plants, installations, sites, works, buildings,

property and equipment of the Borrower and any relevant records

and documents.

Section 3.04. The Borrower shall take or cause to be taken

.ll such action as shall be necessary to acquire as and when needed

all such land and rights in respect of land as shall be required

for the construction (and operation) of the facilities included

in the Project and shall furnish to the Bank, promptly after such

acquisition, evidence satisfactory to the Bank that such land and

rights in respect of land are available for purposes related to

the Project.

() -7-

ARTICLE IV

Management and Operations of the Borrower

Section 4.01. The Borrower shall at all times manage its

affairs, plan its future expansion and carry on its operations,

all in accordance with sound business, financial and public utility

practices, under the supervision of experienced and competent man-

agement.

Section 4.02. (a) The Borrower shall at all times maintain

its corporate existence and right to carry on its operations, and

take all steps necessary to acquire, maintain and renew all rights,

powers, privileges and franchises which are necessary or useful in

the conduct of its business and for the execution and operation

of the Project.

(b) The Borrower shall at all times operate and maintain its

plant, equipment and property and promptly make all necessary re-

pairs and renewals thereof, in accordance with appropriate engi-

neering and public utility practices.

(c) Except as the Bank shall otherwise agree, the Borrower

shall obtain title to all goods financed out of the proceeds of

the Loan free and clear of all encumbrances.

(d) Except in the normal course of its business, the Borrower

shall not, without the prior approval of the Bank, sell, lease,

transfer or otherwise dispose of any of its property or assets

-8-

which shall be required for the efficient operation of its business

and undertaking unless the Borrower shall first repay or make ade-

quate provision satisfactory to the Bank for repayment of, all of

the Loan which shall then be outstanding and unpaid.

Section 4.03. The obligations of the Borrower expressed in

this Agreement shall be applied to any subsidiary of the Borrower

as though such obligations were binding on any such subsidiary,

and the Borrower shall cause any such subsidiary to carry out

such obligations.

Section 4.04. (a) The Borrower undertakes to complete a study

or studies in accordance with terms of reference to be determined

in consultation with the Bank on a new structure of the Borrower's

organization, on the training needs of its staff and on the neces-

sary investments for the implementation of a program of transport

and distribution of natural gas throughout Tunisia.

(b) In connection with the study to be carried out by the

Guarantor, as provided in Section 3.04 of the Guarantee Agreement,

the Borrower undertakes to carry out a study in accordance with

terms of reference to be determined in consultation with the Bank

on the level and application of connection charges for electricity

supply.

(c) The Borrower undertakes to submit the recommendations

of the studies mentioned under paragraphs (a) and (b) of Section

4.04 of this Agreement to the Guarantor and the Bank by June 30,

1978 or such other date as the Bank may agree.

(-9-

(d) The Borrower undertakes to assist the Guarantor in the

carrying out as provided in Section 3.04 of the Guarantee Agree-

ment of a study or studies on an appropriate pricing policy for

oil, gas and electricity in Tunisia.

Section 4.05. The Borrower shall take out and maintain with

responsible insurers, or make other provision satisfactory to the

Bank for, insurance against such risks and in such amounts as shall

be consistent with appropriate practice.

Section 4.06. The Borrower shall develop a system of key in-

dicators to monitor its performance, shall submit by June 30, 1977

or such other date as the Bank may agree, such system to the Bank

for its comments and shall thereafter implement such system with

such modifications as the Bank may reasonably request.

Section 4.07. The Borrower shall by October 31, 1978 or such

other date as the Bank may agree exchange views with the Bank on

the recommendations of the study or studies referred to in Section

4.04 of this Agreement.

- 10 -

ARTICLE V

Financial Covenants

Section 5.01. The Borrower shall maintain records adequate

to reflect in accordance with consistently maintained appropriate

accounting practices its operations and financial condition.

Section 5.02. The Borrower shall: (i) have its accounts

and financial statements (balance sheets, statements of income

and expenses and related statements) for each fiscal year audited,

in accordance with appropriate auditing principles consistently

applied, by independent auditors acceptable to the Bank; (ii) fur-

nish to the Bank as soon as available, but in any case not later

than five months after the end of each such year, (A) certified

copies of its financial statements for such year as so audited,

and (B) the report of such audit by said auditors, of such scope

and in such detail as the Bank shall have reasonably requested;

and (iii) furnish to the Bank such other information concerning

the accounts and financial statements of the Borrower and the

audit thereof as the Bank shall from time to time reasonably

request.

Section 5.03. (a) The Borrower represents that at the date

of this Agreement no lien exists on any of its assets as security

for any debt except as otherwise currently reported to the Bank

or stated in writing.

* -11 -

(b) The Borrower undertakes that, except as the Bank shall

otherwise agree: (i) if the Borrower shall create any lien on any

of its assets as security for any debt, such lien will equally and

ratably secure the payment of the principal of, and interest and

other charges on, the Loan, and in the creation of any such lien

express provision will be made to that effect, at no cost to the

Bank; and (ii) if any statutory lien shall be created on any assets

of the Borrower as security for any debt, the Borrower shall grant,

at no cost to the Bank, an equivalent lien satisfactory to the

Bank to secure the payment of the principal of, and interest and

other charges on, the Loan; provided, however, that the foregoing

provisions of this paragraph shall not apply to: (A) any lien cre-

ated on property, at the time of purchase thereof, solely as se-

curity for the payment of the purchase price of such property; or

(B) any lien arising in the ordinary course of banking transactions

and securing a debt maturing not more than one year after the date

on which it is originally incurred.

Section 5.04. (a) Except as the Bank shall otherwise agree,

the Borrower shall take promptly as needed all such action (in-

cluding without limitation adjustments of its tariffs or charges)

as shall be required to provide in any fiscal year an annual re-

turn on the average of the current net value of the fixed assets

of the Borrower in service at the beginning and end of such

fiscal year at a rate of not less than eight per cent (8%),

commencing with the fiscal year starting January 1, 1977.

(b) The Borrower undertakes (i) to prepare and to sub-

mit to the Bank and to the Guarantor, by October 31 in each

- 12 - 11-18-76

year, a provisional forecast of operating revenues, operating ex-

penses and rate of return for the current year and the next fol-

lowing year, a statement of the tariffs and assumptions underlying

the forecasts, and a statement of the measures proposed, if any,

including changes in tariffs, to produce the annual return provided

for in paragraph (a) of this Section, and (ii) to furnish to the

Bank all such other information relevant to the said forecasts in

such detail as the Bank may reasonably request.

(c) For the purposes of this Section:

(i) the annual return specified in paragraph (a) of

this Section shall be calculated in respect of

each fiscal year, by using as the denominator

the average current net value of the fixed assets

of the Borrower in service at the beginning and

at the end of each such year less the average ac.

cumulated value of customers' contributions, and

as numerator the net operating income of the Bor-

rower for the same year;

(ii) the term "current net value of the fixed assets

of the Borrower in service" means the gross value

of the Borrower's fixed assets in service less

the amount of accumulated depreciation both as

valued from time to time in accordance with con-

sistently applied appropriate methods of valuation

or revaluation acceptable to the Bank;

- 13 - 11-18-76

(iii) the term "average accumulated value of customers'

contributions" means the average of the accumulated

contributions made by customers, at the beginning

and at the end of the fiscal year under considera-

tion, towards the original investment cost of the

assets referred to in subparagraph (ii) above; and

(iv) the term "net operating income" means gross reve-

nues from all sources less all expenditures, in-

cluding expenses of administration, adequate main-

tenance and taxes or any payment in lieu of taxes

and adequate provision for depreciation but ex-

cluding interest and other charges on debt.

Section 5.05. (a) Except as the Bank shall otherwise agree,

the Borrower shall not incur any debt, other than for money bor-

rowed for financing the Project, if the principal amount of such

debt would raise the aggregate principal amount of the Borrower's

debt to more than forty-five per cent (45%) of the sum of its

equity plus the aggregate principal amount of its debt (including

the principal amount of the debt to be incurred).

(b) For the purposes of this Section:

(i) the term "debt" means all debt of the Borrower, in-

cluding debt for the service of which the Borrower

is responsible, maturing by its terms more than one

year after the date on which it is originally in-

curred;

(ii) debt shall be deemed to be incurred on the date of

execution and delivery of a contract, loan agreement

or other instrument providing for such debt; and

(iii) the term "equity" means the total unimpaired capi-

tal and surplus of the Borrower and its subsidiaries

and the accumulated investment contributions made

by customers towards the original investment cost

of the assets referred to in subparagraph (c) (ii)

of Section 5.04 of this Agreement, as such contri-

butions are determined in accordance with appro-

priate accounting practices.

Section 5.06. (a) Except as the Bank shall otherwise agree,

if the Borrower shall prepay part, or all, of the principal amount

outstanding of any debt of the Borrower, the Borrower shall prepay

a proportionate amount of the Loan.

(b) All provisions of the General Conditions relating to re-

payment or redemption in advance of maturity shall be applicable

to any prepayment by the Borrower of the Loan under this Section.

(c) For the purpose of this Section, the term "debt" shall

mean all debt of the Borrower, including debt for the service of

which the Borrower is responsible, maturing by its terms more than

one year after the date on which it is originally incurred.

-15-

ARTICLE VI

Remedies of the BankModification of Prior Loan Agreements

Section 6.01. For the purposes of Section 6.02 of the General

Conditions, the following additional events are specified pursuant

to paragraph (k) thereof:

(a) Decree-law No. 62-8 of April 3, 1962, of the Guarantor

establishing the Borrower, as the same has been or may be amended

from time to time, or any other legislation or regulation of the

Guarantor governing the establishment, organization, powers, fi-

nancial structure and operations of the Borrower shall have been

materially amended, suspended, abrogated, repealed or waived, or

shall cease to be enforced, so as to materially and adversely

affect the operations of the Borrower.

(b) (i) Subject to subparagraph (ii) of this paragraph:

(A) the right of the Borrower to withdraw the

proceeds of the Other Loan shall have been

suspended, cancelled or terminated in whole

or in part, pursuant to the terms of the

Other Loan Agreement providing therefor; or

(B) the Other Loan or any promissory note or

similar instrument delivered pursuant to

such other Loan Agreement shall have be-

come due and payable prior to the agreed

maturity thereof.

- 16 -

(ii) Subparagraph (i) of this paragraph shall not apply

if the Borrower establishes to the satisfaction of

the Bank that: (A) such suspension, cancellation,

termination or prematuring is not caused by the

failure of the Borrower to perform any of its ob-

ligations under such agreeme-t or under such pro-

missory notes or similar instruments; and (B) ade-

quate funds for the Project are available to the

Borrower from other sources on terms and conditions

consistent with the obligations of the Borrower

under this Agreement.

(c) A default shall have occurred under any of the Prior Loan

Agreements other than in respect of the payment of the principal

or interest or any other payment required thereunder.

Section 6.02. For the purposes of Section 7.01 of the General

Conditions, the following additional events are specified pursuant

to paragraph (h) thereof:

(a) the event specified in paragraph (c) of Section 6.01 of

this Agreement shall occur and shall continue for a period of 60

days after notice thereof shall have been given by the Bank to the

Borrower; and

(b) any event specified in paragraphs (a) or (b) or of Sec-

tion 6.01 of this Agreement shall occur.

- 17-

Section 6.03. Section 5.06 of the Loan Agreement, dated Feb-

ruary 25, 1971, between the Bank and the Borrower, as amended by

paragraph (b) of Section 8.02 of the Loan Agreement, dated April 30,

1972, between the Bank and the Borrower, is hereby amended to read

as Section 5.04 of this Loan Agreement, and Section 5.04 of the

Loan Agreement, dated April 30, 1972, between the Bank and the Bor-

rower is hereby amended to read as Section 5.04 of this Loan Agree-

ment.

- 18-

ARTICLE VII

Effective Date; Termination

Section 7.01. The following event is specified as an addi-

tional condition to the effectiveness of the Loan Agreement with-

in the meaning of Section 12.01 (c) of the General Conditions,

namely that, the execution and delivery of the Other Loan Agree-

ment on behalf of the Borrower, have been duly authorized or

ratified by all necessary corporate and governmental action, and

such Other Loan Agreement is in full force and effect.

Section 7.02. The following is specified as an additional

matter within the meaning of Section 12.02 (c) of the General

Conditions, to be included in the opinion or opinions to be

furnished to the Bank, namely, that the Other Loan Agreement

has been duly authorized or ratified by the Borrower, and is

legally binding upon the Borrower in accordance with its terms,

and such Other Loan Agreement is in full force and effect.

Section 7.03. The date April 12, 1977, is hereby specified

for the purposes of Section 12.04 of the General Conditions.

* - 19-

ARTICLE VIII

Addresses

Section 8.01. The following addresses are specified for the

purposes of Section 11.01 of the General Conditions:

For the Bank:

International Bank forReconstruction and Development

1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address: Telex:

INTBAFRAD 440098 (ITT)Washington, D.C. 248423 (RCA) or

64145 (wI)For the Borrower:

Societe Tunisienne del'Electricite et du Gaz

38 Rue Kemal AtaturkTunis, Tunisia

Cable address: Telex:

GAZELEC 12020Tunis

-20-

IN WITNESS WHEREOF, the parties hereto, acting through their

representatives thereunto duly authorized, have caused this Agree-

ment to be signed in their respective names in the District of

Columbia, United States of America, as of the day and year first

above written.

I.NTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

By /s/ Munir BenjenkRegional Vice President

Europe, Middle East and North Africa

SOCIETE TUNISIENNE DE L'ELECTRICITEET DU GAZ

By /s/ Ali HeddaAuthorized Representative

-21-

SCHEDULE 1

Withdrawal of the Proceeds of the Loan

1. The table below sets forth the Categories of items to be

financed out of the proceeds of the Loan, the allocation of the

amounts of the Loan to each Category and the percentage of ex-

penditures for items so to be financed in each Category:

Amount of theLoan Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

Gas turbines, elec- 14,500,000 100% of foreigntrical and mechanical expendituresequipment, machinery,material and instal-lation costs

TOTAL 14,500,000

- 22 -

2. For the purposes of this Schedule the term "foreign expendi-

tures" means expenditures in the currency of any courtry other

than the Guarantor and for goods or services supplied from the

territory of any country other than the Guarantor.

3. The disbursement percentages have been calculated in compli-

ance with the policy of the Bank that no proceeds of the Loan

shall be disbursed on account of payments for taxes levied by, or

in the territory of, the Guarantor on goods or services, or on

the importation, manufacture, procurement or supply thereof; to

that end, if the amount of any such taxes levied on or in respect

of any item to be financed out of the proceeds of the Loan decreases

or increases, the Bank may, by notice to the Borrower, increase or

decrease the disbursement percentage then applicable to such item

as required to be consistent with the aforementioned policy of the

Bank.

4. Notwithstanding the provisions of paragraph 1 above, no with-

drawals shall be made in respect of payments made for expenditures

prior to the date of this Agreement.

5. Notwithstanding the disbursement percentage set forth in the

table in paragraph 1 above, if the Bank has reasonably estimated

that the amount of the Loan will be insufficient to finance the

agreed percentage of all expenditures, the Bank may, by notice to

the Borrower reduce the disbursement percentage then applicable

to such expenditures in order that further withdrawals under the

Loan may continue until all expenditures thereunder shall have

been made.

* - 23-

6. If the Bank shall have reasonably determined that the pro-

curement of any item to be financed and of the proceeds of the

Loan is inconsistent with the procedures set forth or referred

to in this Agreement, no expenditures for such item shall be

financed out of the proceeds of the Loan and the Bank may, with-

out in any way restricting or limiting any other right, power

or remedy of the Bank under the Loan Agreement, by notice to the

Borrower, cancel such amount of the Loan as, in the Bank's reason-

able opinion, represents the amount of such expenditures which

would otherwise have been eligible for financing out of the pro-

ceeds of the Loan.

- 24 -

SCHEDULE 2

Description of the Project

The Project is part of the Borrower's 1977-1981 development

program for generation facilities and consists of the following

parts:

Part A: Supply and installation at Sfax of two gas turbine units,

each unit consisting of a heavy duty open-cycle gas tur-

bine of about 20 MW each, a generator, an alternator and

control equipment, and of the transformer and switchgear

to connect the alternators to the transmission system.

Part B: Supply and installation at Menzel Bourguiba, Tunis South,

Korba and Metlaoui of five gas turbine units, each unit

consisting of a heavy duty open-cycle gas oil turbine of

about 20 MW each, a turbine generator, an alternator and

control equipment as a unit, and of the transformer and

switchgear to connect the alternators to the Borrower's

transmission system.

The Project is expected to be completed by December 31, 1980.

* -25-

SCHEDULE 3

Amortization Schedule

Payment of PrincipalDate Payment Due (expressed in dollars)

On each April 15 and October 15

beginning April 15, 1979through October 15, 1989 630,000

On April 15, 1990 64o,ooo

To the extent that any portion of the Loan is repayable in acurrency other than dollars (see General Conditions, Section4.02), the figures in this column represent dollar equiva-lents determined as for purposes of withdrawal.

0 ......

- 26-

Premiums on Prepayment

The following percentages are specified as the premiums pay-

able on repayment in advance of maturity of any portion of the

principal amount of the Loan pursuant to Section 3.05 (b) of the

General Conditions:

Time of Prepayment Premium

Not more than three yearsbefore maturity 1.85%

More than three years butnot more than six yearsbefore maturity 3.75%

More than six years but notmore than ten yearsbefore maturity 6.20%

More than ten years but notmore than twelve yearsbefore maturity 7.45%

More than twelve yearsbefore maturity 8.70%

* -27-

SCHEDULE 4

Procurement

A. International CoMpetitive Bidding

1. Contracts for the purchase of goods or for civil works shall

be procured in accordance with procedures consistent with those

set forth in Part A of the "Guidelines for Procurement under World

Bank Loans and IDA Credits" published by the.Bank in August 1975

(hereinafter called the Guidelines), on the basis of international

competitive bidding.

B. Evaluation and Comparison of Bids for Goods; Preference forDomestic Manufacturers

1. For the purpose of evaluation and comparison of bids for the

supply of goods: (i) bidders shall be required to state in their

bid the c.i.f. (port of entry) price for imported goods; (ii) cus-

toms duties and other import taxes on imported goods, and sales

and similar taxes on domestically supplied goods, shall be excluded;

and (iii) the cost to the Borrower of inland freight and other

expenditures incidental to the delivery of goods to the place of

their use or installation shall be included.

2. Goods manufactured in Tunisia may be granted a margin of pref-

erence in accordance with, and subject to, the following provisions:

- 28 -

(a) All bidding documents for the procurement of goods shall

clearly indicate any preference which will be granted, the infor-

mation required to establish the eligibility of a bid for such

preference and the following methods and stages that will be fol-

lowed in the evaluation and comparison of bids.

(b) After evaluation, responsive bids will be classified in

one of the following three groups:

(1) Group A: bids offering goods manufactured in Tuni-

sia if the bidder shall have established to the

satisfaction of the Borrower and the Bank that the

manufacturing cost of such goods includes a value

added in Tunisia equal to at least 20% of the ex-

factory bid price of such goods.

(2) Group B: all other bids offering goods manufactured

in Tunisia.

(3) Group C: bids offering any other goods.

(c) All evaluated bids in each group shall be first compared

among themselves, excluding any customs duties and other import

taxes on goods to be imported and any sales or similar taxes on

goods to be supplied domestically, to determine the lowest evalu-

ated bid of each group. Such lowest evaluated bids shall then be

compared with each other, and if, as a result of this comparison,

a bid from group A or group B is the lowest, it shall be selected

for the award.

* -29-

(d) If, as a result of the comparison under paragraph (c)

above, the lowest bid is a bid from group C, all group C bids

shall be further compared with the lowest evaluated bid from

group A after adding to the c.i.f. bid price of the imported

goods offered in each group C bid, for the purpose of this fur-

ther comparison only, an amount equal to (i) the amount of cus-

toms duties and other import taxes which a non-exempt importer

would have to pay for the importation of the goods offered in

such group C bid; or (ii) 15% of the c.i.f. bid price of such

goods if said customs duties and taxes exceed 15% of such price.

If the group A bid in such further comparison is the lowest, it

shall be selected for the award; if not, the bid from group C

which as a result of the comparison under paragraph (c) is the

lowest evaluated bid shall be selected.

C. Review of Procurement Decisions by the Bank

1. Review of invitations to bid and of proposed awards and final

contracts:

With respect to all contracts for turbines, equipment, material

and machinery estimated to cost the equivalent of $100,000 or

more:

(a) Before bids are invited, the Borrower shall furnish to

the Bank, for its comments, the text of the invitations to bid

and the specifications and other bidding documents, together with

a description of the advertising procedures to be followed for

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the bidding, and shall make such modifications in the said docu-

ments or procedures as the Bank shall reasonably request. Any

further modification to the bidding documents shall require the

Bank's concurrence before it is issued to the prospective bidders.

(b) After bids have been received and evaluated, the Bor-

rower shall, before a final decision on the award is made, inform

the Bank of the name of the bidder to which it intends to award

the contract and shall furnish to the Bank, in sufficient time for

its review, a detailed report on the evaluation and comparison

of the bids received, and such other information as the Bank

shall reasonably request. The Bank shall, if it determines that

the intended award would be inconsistent with the Guidelines or

this Schedule, promptly inform the Borrower and state the reasons

for such determination.

(c) The terms and conditions of the contract shall not, with-

out the Bank's concurrence, materially differ from those on which

bids were asked or prequalification invited.

(d) Two conformed copies of the contract shall be furnished

to the Bank promptly after its execution and prior to the submis-

sion to the Bank of the first application for withdrawal of funds

from the Loan Account in respect of such contract.

2. With respect to each contract to be financed out of the pro-

ceeds of the Loan and not governed by the preceding paragraph,

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the Borrower shall furnish to the Bank, promptly after its execu-

tion and prior to the submission to the Bank of the first applica-

tion for withdrawal of funds from the Loan Account in respect of

such contract, two conformed copies of such contract, together

with the analysis of the respective bids, recommendations for

award and such other information as the Bank shall reasonably re-

quest. The Bank shall, if it determines that the award of the

contract was not consistent with the Guidelines or this Schedule,

promptly inform the Borrower and state the reasons for such de-

termination.